Medtronic’s diabetes segment has seen slower revenue growth due to unfavorable currency translation, accounting for only 8% of the company’s total sales. The company operates across four main segments – Cardiovascular, Neuroscience, Medical Surgical, and Diabetes – with Cardiovascular being the largest, accounting for 37% of total sales. Medtronic’s overall sales have risen at a 2.9% average annual rate since fiscal 2020, with slower growth compared to some competitors.
Although Medtronic’s revenue has been growing, it has been at a slower pace than some of its peers, with a decline in operating margin from fiscal 2020 to fiscal 2024. This has affected overall earnings growth and led to a decline in MDT stock price by 25% over a three-year period. The stock has underperformed the broader market in each of the last three years, raising concerns about its performance in the future.
In comparison to other stocks in the Health Care sector and the broader market, MDT stock has consistently underperformed the S&P 500 in recent years. The Trefis High Quality Portfolio, on the other hand, has outperformed the benchmark index each year over the same period. This outperformance is attributed to better returns with less risk for the HQ Portfolio stocks, providing a smoother investment experience.
Looking ahead, there is uncertainty surrounding Medtronic’s future performance, given the current macroeconomic environment. With high oil prices and elevated interest rates, there are concerns about whether MDT stock will continue to underperform or see a recovery. From a valuation perspective, MDT stock appears to have limited room for growth, with an estimated valuation of $93 per share, reflecting an upside of over 10% from current levels.
While some of Medtronic’s segments, including Diabetes, are expected to see growth in the coming years, the stock seems to have priced in much of the positives already. The company is expected to benefit from increased procedures volume and the expansion of new products, but the stock may have limited potential for further growth. Investors are advised to consider how Medtronic’s peers are performing on key metrics to make informed investment decisions.
